Twenty years have passed since Nelson and Winter (1982) proposed routines as the unit of
analysis of an evolutionary theory of economic change. Since then, the concept of routines
has been taken up widely in the economics and business literature. Many ambiguities and
open questions still persist, however. The article presents a review of the literature on routines
(mainly) since 1982, focussing on the questions 'What progress has been made in
understanding what routines are', and 'what are their roles in organisations and in the
economy?'

The EU internal market has predominantly been studied in terms of changes in delegation of authority and division of labor between EU institutions and member states. However, this EU internal focus ignores that already in 1987 the completion of the internal market was substantially left to the private European standardization organizations (ESO). The paper addresses two fundamental challenges in this transnational, public-private, and internal-external delegation of authority. First, it involves a governance challenge, because private actors are directly involved – but to a certain extent outside EU political and administrative control – in the constitution of the internal market. Second, the delegation raises important analytical questions concerning the identification of the institutional locus of European integration, when the realization of the political goals with the internal market is dependent on an inter-organizational coordination between the EU and ESO. Applying the analytical concept of a ‘policy field’ the analysis shows how the completion of the internal market fundamentally challenges institutionalized conceptions of the role of politics in constituting markets.
Keywords: Internal market, policy field, technical standards, transnationalization, new approach harmonization, private product policy

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For several decades industrial economics in Michael Porter’s rendering has ruled
business analysis in information systems. Have Internet technologies brought the demise of
Industrial Economics as tool for information systems (IS) analyses? Examples of electronic
exchanges indicate a break between business and information models. We critically assess
Porter’s analysis of the Internet and exchanges finding relationships, coordination and
complementarity rather than positioning and activity analysis applicable. Whether to amend or
discard Porterian models considering the relevance of network economics and collaboration
models for information systems analyses concludes our discussion.

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Contracts and exits from a sample of 179 investment rounds in 132 entrepreneurial firms
by 17 European venture capital (VC) funds are analyzed. The data indicate the financial contracts
are quite heterogeneous in terms of both the cash flow and control rights. The use of different
securities by European VC funds does not depend on the definition of venture capital, and the
securities used are not functional equivalents. A normative empirical analysis of exit shows the
likelihood of different types of exit vehicles (IPO, acquisition, and liquidation) and the returns to
venture capital depend on not only firm specific characteristics but also the allocation of cash
flow and control rights.
Keywords: Venture Capital, Financial Contracting, Exit, IPO, Acquisition
JEL Classification: G24, G28, G31, G32, G35

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An alternative perspective on the convergence of corporate governance systems

Thomsen, Steen(København, 2001)

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The possible convergence of international systems of corporate governance has become the topic of a lively debate. In opposition to the political theory (Roe 1991, 1994), Gilson (2000) and Coffee (1999) have persuasively argued that although little formal convergence may be taking place in ownership and board structure, corporate behaviour seems to be converging in a functional sense. This paper reviews Coffees argument and some of the ensuing debate emphasising internationalisation of equity markets as the powerful driving force behind convergence. But while the debate has focused rather narrowly on convergence of European governance to American standards, I argue that US corporate governance has also converged to European standards: insider ownership and managerial incentives have increased; outside board members, independent subcommittees and chairmen have become more common and the banking system has been deregulated to allow banks to play a more active governance role.

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We begin by identifying a typical governance life-cycle, defined as changes in ownership structure, and including both the identity of the major owner and ownership concentration. The cycle is marked by key events and phases including start-up, initial growth, mature growth, and possibly a crisis and restructuring stage or exit stage. The governance cycle for transitional countries reflects some specific characteristics –e.g. often privatization produces specific initial ownership structures, with an unusually high proportion of insider, especially, employee ownership. Subsequently pres-sures for restructuring produce strong impulses for ownership changes. There is limited possibility for external finance because of the embryonic development of the banking system and the capital markets during early transition. The governance cycle is also influenced by specific features of the institutional, cultural and economic environment in a country. The varying importance of these fac-tors is expected to produce differences in key features of ownership cycles such as the speed at which particular ownership changes occur. To provide simple hypothesis tests, we use new and rich enterprise panel data sets for the three Bal-tic countries. The data enable various measures of ownership to be constructed (including the iden-tity of major owners and ownership concentration). The empirical analysis covers the ownership cycle with emphasis on initial ownership and subsequent changes. Our key method is to assemble a series of transition matrices showing both starting and final ownership configurations for sample enterprises and to simultaneously provide information on changes in concentration for the largest single owner. For Estonia this is supplemented with an analysis of the frequencies of different own-ership-cycles including intermediary stages of ownership. In spite of important differences in insti-tutional development, especially concerning the privatization process, we find that governance cy-cles are broadly similar in all countries. Employee ownership is rapidly fading and mainly being succeeded by managerial ownership. There are changes back and forth between manager and do-mestic external ownership, while foreign ownership is quite stable. Ownership concentration is mostly increasing after privatization, which included diversification both to employees and external owners. Since ownership diversification did not sit well with the slow development of the institu-tional framework, as expected we see a subsequent concentration of ownership on both managers, external domestic and foreign owners. However, variation in institutions, there are also important differences across countries. The adjustment of ownership structures is faster in Estonia and this can be explained by the relatively fast pace of institutional change and evolution of important gov-ernance institutions, including tough bankruptcy legislation and advances in the financial system.
JEL-codes: G3, J5, P2, P3 Keywords: corporate governance, life-cycle, privatization, ownership change, transition econo-mies, Estonia, Latvia, Lithuania .

Ownership is determined by firm specific factors and the environment. Firms change over their life-cycle. The governance cycle – here defined as changes in identity of the dominant owner and own-ership concentration - is marked by key phases including start-up, growth, and possibly a restructur-ing or exit stage. During transition the cycle reflects: privatization often with a high proportion of employee ownership like in Russia and in Slovenia; strong pressures for restructuring and owner-ship changes; limited possibility for external finance because of embryonic development of the fi-nancial system. To provide simple hypothesis tests, we use Russian enterprise data for 1995-2003 and Slovenian data covering 1998-2003. In spite of differences in institutional development, con-cerning privatization and development of corporate governance institutions, we find that govern-ance cycles are broadly similar in the two countries. Employee ownership is rapidly fading, but while change to manager and non-financial domestic outsider ownership is typical for Russia, man-ager ownership is not widespread in Slovenia. Instead change to financial outsiders in the form of Privatization Investment Funds is frequent. Foreign ownership, which is rare especially in Russia, is quite stable. The ownership diversification to employees and diversified external owners during privatization did not fit well to the low development of institutions. As expected we observe in both countries a subsequent concentration of ownership on managers, external domestic and foreign owners.
JEL-codes: G3, J5, P2, P3 - Keywords: corporate governance, life-cycle, privatization, ownership change, transition economies, Russia and Slovenia.

From the perspective of Austrian economics, this paper develops a conceptual understanding of
how corporate venture managers recognize and discover opportunities in a network environment.
In an effort to create a better understanding of who is involved in process, this paper reports on
the development path of an entrepreneurial opportunity of the Danish corporate venture capitalist,
Danfoss A/S. This paper distinguishes itself from previous research done on entrepreneurial
opportunities by creating a holistic and conceptual framework, which broadens and expands the
perception of the market participants involved in recognition and discovery. Consequently the
paper offers insight to a diversified group of actors who mix and match technological and market
capabilities in a constant process of recognition and discovery.
Key words: Corporate venturing, entrepreneurship, discovery, networks, opportunities,
recognition.

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Complementarities, Common Change Initiatives, and The Team-Based Organization

Zenger, Todd R.(København, 2002)

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Hybrid governance forms that seek to meld the virtues of both market control and traditional hierarchical control are alluring. While extensive research has examined such hybrids forms, the research has been restricted largely to external hybrids --- market exchanges infused with elements of hierarchical control. Comparatively little research, outside of the M-form literature, has examined internal hybrids --- hierarchical forms infused with elements of market control. This paper contends that common change initiatives, such as TQM, reengineering, autonomous work teams, and group-based rewards, are appropriately viewed as attempts to craft internal hybrids by selectively infusing elements of market control within hierarchy. However, these common change initiatives are implemented commonly in isolation and, as a consequence, violate patterns of complementarity that both sustain traditional hierarchy or support the stable infusion of market control. Managers overlay new measures on existing, functionally-oriented structures; they implement new structures without new performance measures and without new pay systems; they implement new pay systems, but fail to restructure or develop new performance measures. The paper argues that these violations of complementarity often trigger the unraveling of the bundle of elements that support traditional hierarchy and spiral hierarchies toward fundamental transformation. The clear trajectory of these transformations is toward quite radically, disaggregated organizations structured around teams. The paper presents both logic and evidence supporting the existence of complementarities among these common change initiatives.

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The purpose of the present article is to contribute to a more detailed understanding of the
determinants of the firm’s environmental performance. We pursue this aim by formulating a
schematic theoretical model including a number of antecedents, mediators and consequences
that are important according to the literature on environmental management and corporate
greening. In addition, the model includes market orientation and the firm’s level of
internationalization as possible determinants of environmental performance. Unfortunately,
the previous empirical research on environmental management and corporate greening has not
yet developed the measures needed to achieve a reasonable level of construct validity. To fill
this gap, we complement previous research by developing and refining the multi-item scales
necessary to measure the constructs of our theoretical model. We use a series of nested
covariance structure models to test our theoretical model on survey data from 1995 and 1999.

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In the 1990s, most of the Central and Eastern European countries (CEECs) went through
radical liberalization and adopted large-scale economic and political reform programs. These
programs included almost complete price, trade and capital movement liberalization,
macroeconomic stabilization, currency reform, and small-scale and large-scale privatization.
What is the role of the development of a legal and institutional infrastructure along with these
radical changes in society and the economy? The first part of this paper is based on the results
of an interview study of entrepreneurs and managers in Estonia undertaken in 1998 and in
Estonia, Russia, Finland and Sweden in 2000 in order to obtain their view of the behavior of
government agencies, lawmaking procedures and the operation of law enforcement
mechanisms.
The second part of this paper presents summary results from interview surveys of Estonian
manufacturing firms undertaken from 1994-2000. The surveys were designed to
quantitatively measure the state of and changes in the Estonian business environment,
focusing on the key aspects of financial contractual relationships of Estonian manufacturing
firms as well as regulation and dispute resolution mechanisms. Among the observations it is
noted that government regulations do not seriously affect business decisions regarding the
operation, expansion or closing down of Estonian manufacturing firms. A second observation
is that the Estonian court system is perceived as inadequate for resolving a substantial number
of disputes and conflicts among economic agents although legislation exists. Most firms rely
on mechanisms of self-enforcement when possible.
Journal of Economic Literature Classification numbers: K42, K49, G18, G30
Keywords: business environment, corporate financial relationships, enterprise restructuring,
corruption, law making procedures, law enforcement.

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This paper is based on an explorative case study of all.department e-mails that were sent on the Intranet of a Danish university department. Following a social constructionist approach, our analysis assumes that language use shapes relations, identities, and representations. We thus investigate which social relations are expressed and constructed in the e-mail discourse and how the organizational world of the department is represented in the all.department e-mails. Our analyses of the e-mails show that the managerial voices are dominant as well as the perception of e-mail communication as a tool of information transmission. However, a few e-mails sent by employees without specific organizational functions differ significantly from the "managerial" mails. In these mails employee voices articulate a latent and unfulfilled need for a community and a forum for dialogue. The usage of the all.department e-mail communication is also related to the ongoing change of managing university departments in Denmark.

This paper addresses an issue of great importance for the future organization of the consumer
electronics industry: the "battle" of control over component-based digitization. We are now
witnessing the dismantling of the Japanese Model that has prevailed in consumer electronics
over the past 30 years. Specialized and large-scale component suppliers have taken the lead in
most component-based innovations and have obtained increasingly powerful positions in the
value chain of consumer electronics. This paper provides an in-depth study of the strategic and
structural ramifications of one such component-based innovation, the current transformation of
sound amplification from conventional to digital amplifiers. We study the early formation of this
new technology as especially reflected in the particularly dynamic cluster of innovation in
Denmark and extend the analysis to the global strategizing around this new technology. A
framework is developed to explain the reluctance of most of the large consumer electronics
giants in developing/adopting this new technology.
Key words: Consumer electronics, Industrial dynamics, Open Innovation
JEL Codes: L6, L68, O32

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We assess the argument that corporate acquisitions are driven mainly by agency
considerations. This argument holds that certain kinds of mergers—mergers between firms in
unrelated industries, mergers between firms with large differences in price-earnings ratios, and
mergers financed with stock swaps, for example—will consistently fail, eventually being reversed
in a divestiture. Appealing to Mises’s theory of entrepreneurship, we argue instead that
divestitures of previously acquired assets usually result from experimentation and learning,
healthy attributes of a market economy. We then describe empirical evidence that the long-term
success or failure of corporate acquisitions cannot, in general, be predicted by measures of
agency conflicts. We also show that mistaken acquisitions are more likely under certain circumstances,
namely during periods of intense, industry-specific regulatory activity. This is consistent
with the view, expressed repeatedly in the Austrian literature, that entrepreneurial error is associated
with government intervention—in particular, with government ownership of property and
interference with the price system.
JEL Classifications: D84, G34, G38
Key words: acquisitions, divestitures, entrepreneurship, market process, experimentation

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Does wrongful conviction lower deterrence and can this explain society’s aversion to
sanctioning the innocent? This paper argues that for some of the most important
categories of crime such as murder, assault or robbery, the answer to both questions is
no. For these categories of crime, a potential offender need not fear wrongful
conviction for any particular criminal act he or she chooses not to commit. For
example, if a potential offender decides not to murder another person, he or she
should not fear being wrongfully convicted of it, since the person will not be dead,
and there will therefore be no investigation and no trial. He of she may risk being
wrongfully convicted of another crime, but that risk exists independently of his or her
own actions.
It may be argued that wrongful conviction lowers deterrence in more indirect ways.
First, the possibility of being sanctioned for a crime one does not commit may lower
the threat of being sanctioned for a crime one commits, if two sanctions are not twice
as threatening as one. Second, if wrongful conviction halts further investigations that
may lead to the true offender, and third, if a potential offender thinks that if he or she
does not take advantage of a crime opportunity, he or she may be wrongly convicted
in the event that some other person grasps the same opportunity. However, it will be
argued that wrongful conviction may also increase deterrence, and the three indirect
effects are in any event unlikely to be quantitatively important in the real world.
An implication of the present analysis is that society’s aversion to sanctioning the
innocent cannot be rationalized by or reduced to a concern for deterrence.

The paper describes the formation of the Durban Auto Cluster in the context of trade liberalization. It argues that the improvement of operational competitiveness of firms in the cluster is prominently due to joint action. It tests this proposition by comparing the gains from cluster activities in the areas of supplier development, human resource development, logistics, and benchmarking, and by contrasting the impact of joint action against a host of other variables, notably international competition and technical assistance by foreign partners.

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We derive an explicit solution to the portfolio problem of a power utility investor
with preferences for wealth at a ¯nite investment horizon. The investor can invest
in assets with return dynamics described as part of a general multivariate model.
The modeling framework encompasses discrete-time VAR-models where some of
the state-variables (e.g. expected excess returns) may not be directly observable.
A realistic multivariate model is estimated and applied to analyze the portfolio
implications of investment horizon and return predictability when real interest rates
and expected excess returns on stock and bonds are not directly observed but must
be estimated as part of the problem faced by the investor. The solution exhibits
small variability in portfolio allocations over time compared to the case when excess
returns are assumed observable.
JEL Classification: G11
Keywords: Portfolio choice, predictability, VAR, unobserved state-variables, hedging demands